Dissecting the political body of Europe

Month: October 2011

The recent commotion about the possibility of a British referendum on EU membership raised an important question: When are referendums a good idea?

At first it might be hard to see any argument at all against a referendum. After all, in a democracy the public should be allowed to decide the course of policy, especially when really important issues, like European integration, are at stake. Surely, whoever is against a referendum is just scared from the outcome.

It is a bit more complicated, however.

First, in a referendum your choice is limited to a small number of alternatives (usually two – ‘yea’ / ‘nay’ ). Formulating and narrowing down the alternatives can be more important than the selection between them, and it is a process in which the public has no say.

Second, the method of selection matters. The proposed British EU referendum had three options (stay, leave, re-negotiate). But this is prone to a voting cycle. It could very well be that there is a majority that prefers leaving to staying, a majority that prefers staying to re-negotiation, and a majority that prefers re-negotiation to leaving at the same time and amongst the same group of people. How do we choose then? We could use plurality rule (whichever alternative from the three has the most votes wins) to decide, but why plurality is any better than pairwise majority voting? Obviously, the power of the one who determines the options and the selection method looms even larger. Why not include a fourth alternative? Going down that road, why not offer people a list of policy areas for which they can express a desire to ‘Europeanize’ or keep at the national level? In fact, why not let people fill-in which issues they want to delegate to the EU and which ones to reserve for the state?

The third, and most important problem is the meaningfulness of the alternatives being offered. Let us first consider the option of re-negotiation of the British relationship with the EU. How realistic is this option (and what does it imply) given that the outcome of negotiations necessarily depends on both sides? I would certainly choose, if offered the chance, to re-negotiate my mortgage rather than keep paying high interest or defaulting, but how likely is that my bank would agree to the proposal? Why do the British Conservatives assume (and offer the option to the people) that the EU will agree to their terms of engagement? The EU might very well refuse the UK (or any other country) to unilaterally pick and choose from the integration menu because of the spillovers and externalities of economic integration. For example, if I allow you to sell all your goods and services in my country, I can demand some minimum standards on, say, protection of the environment and/or work safety in your country to avoid social and environmental dumping. Integration a la carte is envisaged to some extent in the Treaties (enhanced co-operation and opt-outs) but is clearly, and for good reasons, subject to limitations (and the consent of the other Member States). Sure, having the constraint of a national referendum at home gives you a powerful negotiation advantage to secure better terms for yourself, but at the risk of compromising the entire bargain resulting in worse outcomes for all sides. Britain’s threat of leaving the Union unless re-negotiating its relationship is a bluff that might very well be called by the EU. (I assume Britain would still want access to the single European market but the opposite would surely be an economic suicide).

What about the option of leaving the EU altogether? After all, Norway and Switzerland all seem to be thriving without being part of the EU. Again, I still assume that the UK would want access to the internal market even if it leaves the EU. Access to the market without being an EU member, however, comes at a price. First, there are regular financial contributions to EU programs (for example Switzerland was required to pay about €645 million for projects in the new member states and Norway pays more than 150 million each year). But the bigger price comes from having to implement EU rules without having influence over their preparation. Norway and Switzerland still have to apply the vast majority of EU legislation (all Internal Market-related rules) and policies even though they do not have a say in their making. Britain, and Cameron in particular, already felt how painful this can be when told to keep their opinions on the euro-crisis to themselves. I don’t think that the British public fully realized the implications of leaving the EU without leaving the single market.

Referendums only make sense if the options being offered have consequences which are reasonably clear and, above all, realistic. This is definitely not the case with the recent proposal of the British Conservatives. At the same time, one cannot and should not ignore the growing negative public sentiment towards the EU in the UK (and beyond). The EU needs to be politicized beyond the false dichotomies of membership/ no membership. The opinions of British (and Dutch, and Slovakian, and Maltese) citizens should be heard and taken into account when making European policies. And their preferences should be respected in refraining from making common European policies as well. But all this needs to be accommodated through the regular channels of political contestation and representation rather than incidental and manipulable forums of direct demockracy.

After providing somewhat half-hearted coverage of the eurocrisis for months, focusing mostly on the Greek side of the story, Dutch media have apparently decided to follow it a bit closer. The tide of opinion seems to be turning – so slowly that it seems as if the journalists’ questions relate to events that took place six months or a year ago – when these questions would have been fresh and relevant. We start also hearing the voices of experts who remind us that it is not only about the money but also about political union that remind us that the bargaining between leaders that has prolonged the agony of the crisis for the last year is not only about money, but also about political union (see Bernard’s appearances on premtime here, here and here and our colleague Wim Voermans’s in Nieuwsuur here). Suddenly we hear from all sides – (see the interview with Ronald Plasterk) – that there is a lack of leadership and decisiveness from the leaders of the EU and especially from President Sarkozy and Chancellor Merkel. Already since the summer of 2010 I have been watching with incredulity the lack of political will to take decisive steps to deal with the crisis, so I sympathize. and yet…the hypocrisy of blaming it all on the German and French leaders begins to grind. Some questions come to mind:

First, where has Dutch leadership been for the last year and a half? The Prime Minister has made an art out of answering questions about the government’s reaction to the crisis as evasively as he can, while the Minister of Finance often leaves the impression that a proper response to the crisis must include insulting Greece or other European partners (his statements offering to privatize Greek companies himself if the Greeks were not getting on with it come to mind). Of course we know that the political support of the PVV leaves this government little room for manoeuvre. But the same is true of Angela Merkel who has been constrained by the decision of the German Constitutional Court on the Constitutional Treaty for Europe (the Lisbon treaty).

The second question that follows from this is, can we blame the leaders for their essentially democratic leadership? Rutte takes into account his government’s precarious position, Merkel takes into account the constraints placed on her by the highest court of Germany and the German Constitution, as well as German public opinion, the Finnish government takes into account the opinion of the True Finns and their supporters and so on. Only here and there we see a prime minister like Iveta Radicova in Slovakia who was ready to put her government’s fate on the line for the euro. What we have seen is that, the intergovernmental bargaining between sovereign democracies contains countless veto points. the more democratic the decision method, the less likely that the leaders will come up quick and decisive solutions.

What is then to be done? The Spinelli group sees in developments a sign that it is time to move to a federalist solution or to apply the Monnet method and empower the Commission again. The problem is, the public remains skeptical of the EU – in the Netherlands, in Germany, in Finland…and here we come to the lack of leadership. As far as I am concerned, in the Netherlands we have had lack of leadership with regard to the EU for the last decade. During the economic boom, the good times, there was hardly any politician in this country to speak of the value of the European project, of the contribution of the EU to prosperity in the Netherlands or anywhere in Europe. Instead, we have had former Finance Minister Zalm hammering on about the Dutch contribution to the EU being too big – incidentally, a couple of years of statements that could not have passed unnoticed by the voters during the referendum on the Constitution for Europe. Talking about the EU – if politicians talked about the EU at all – has meant talking about money and it continues in this way today – the most recent example being Plasterk’s interview of last night when he asserted the PvDA would support a new package of rescue measures if it would work for the Netherlands financially. But continuing to try to make decisions on the basis of the cost-benefit calculations of today when the globalised markets change the situation by the hour will no longer work, neither in terms of getting a reliable idea of how much anyone would gain or lose or in terms of democratic process. We need a different attitude, from politicians and the public. We know from theory that in times of uncertainty, when the situation is too complex to calculate the best action, people lean back on norms and values to guide them in their decisions. So the real question is, do we believe that European Union should be saved? Do we believe in free movement of goods and persons, in free trade, in solidarity, in peace – all these things which the EU has stood for more than five decades, despite all its deficiencies and convoluted rules? This is what our leaders have to ask themselves now. And not be afraid to say what they stand for, regardless of what opinion polls tell them. This is what I would call leadership.

“David Cameron is bracing himself for the biggest rebellion since he took office, with possible frontbench resignations, when Tory MPs defy No 10 to vote in favour of a referendum on Britain’s EU membership on Monday.”

Cameron says he agrees with the idea of a referendum in principle but cannot support it because of the coalition and the Liberal Democrats. We all feel his pain… If only those Liberals weren’t in the way, he would go to Brussels this very minute, bang on the table, withdraw Britain’s EU membership, get her money back, close borders to French and German goods, impose duties on the import of Dutch Gouda and Spanish chorizo, stop British students from going to Barcelona for those bohemian Erasmus exchanges, bring his policemen back from EUROPOL in the Hague, leave the single European sky, send back all those Polish plumbers, and re-introduce restrictions on cross-border financial transfers. If only…

I find Britain’s position on European integration rather hypocritical. I am pretty sure that even the Tories would prefer a world in which the EU exists to a world in which it doesn’t. But what they would like best is a world in which the EU exists but the UK is free-riding on the single market and the common policies. Take the benefits from free trade and let someone else pay for the externalities.

In 2003, the Greek Prime Minister Costas Simitis had two special moments. First, he unveiled a ‘social package’ worth 1.7 billion euros which included measures to reduce fuel costs for farmers, raising farmers’ base pensions, abolishing a tax on agricultural land’s transfer, an annual subsidy of 1,000 euros for every child studying in other cities, reducing a tax for buying new cars by 20 percent, raising a supplementary pension and creating 25,000 part-time jobs in the public sector. Second, he presided over the historic meeting in Athens during which 12 new member states signed the Accession Treaty to join the EU.

Eight years later, he might have some regrets. About the second one, I mean. Slovakia, one of the countries that Simitis welcomed into the EU, now threatens to unilaterally torpedo the ESFS (European Financial Stability Facility) expansion by refusing to ratify it in its Parliament (here is Simitis advocating a bigger role for national parliaments in European integration). Even if Slovakia eventually approves the deal, one can only admire one of these bitter-sweet ironies that life so often offers.

During the 1990s and early 2000s, the former communist countries from Central and Eastern Europe (CEE) were subject to rather ruthless and unapologetic economic conditionality. The old member states, Greece included, insisted on the strict application of the Copenhagen criteria which included “the existence of a broad consensus about essentials of economic policy” and “sustainable public finances and external accounts”. There were no attempts to solve the post-communist economic crisis that all CEE countries went through by pumping billions of borrowed euros in their economies. No, the CEE governments were expected to swallow the bitter pills of austerity, privatization, and public service cuts. And they did, slowly emerging by the economic debris of post-communism with reformed economies and public sectors.

That’s why today it is hard not to sympathize with Slovakia which is asked to contribute 7.7 billion euros (which amounts to approx 8% of its 2010 GDP) to the ESFS.

In the words of the Speaker of the Slovak Parliament Richard Sulík: “How am I supposed to explain to people that they are going to have to pay a higher value-added tax (VAT) so that Greeks can get pensions three times as high as the ones in Slovakia?” (interview by Spiegel, noted via Marginal Revolution). Which is why his party, although part of the ruling coalition, is expected to abstain and bring down the ESFS expansion proposal and with it the Slovak government, which tied its fate to that of the vote.

Dimiter

Update, 11/10/11, 22.30h The Slovak government has lost the confidence vote…

From Andrew Rettman at the EU observer http://euobserver.com/24/113819 we learn that Russian Prime Minister Vladimir Putin is offering an Eurasian Union to its neighbours, countries such as Ukraine, Belarus, Moldova, Kazachstan, Turkmenistan and others. See here http://www.izvestia.ru/news/502761 for the op ed article by Putin. He celebrates the coming into force of the Common Economic Space (CES) arrangements between Russia, Belarus and Kazachstan and describes these arrangements as the pinnacle of 20 years post Soviet integration in the framework of the Commonwealth of Independent States (CIS). He explains that the CIS builds on the created Customs Union between Russia, Belarus and Kazachstan and that all of these interconnected integration projects build on understanding that the countries involved share strategic national interests. In the future, he envisages the establishment of common standards and regulations for products and services, by the way, he adds that these would be in the majority of cases harmonized with the European ones.

Somewhere here I begin to feel that the rosy tints of the picture he paints becomes so intense that I have to wake up from the utopian dream and try to remember what reality looks like. I manage to recall that often, when Russia’s government has been displeased with the foreign or domestic policies of one of the countries in its neighbourhood, it has introduced trade sanctions or gas restrictions, usually based on an existing, but unverifiable rule. Georgian wine and Polish meat imports come to mind. Even when trade relations do not become the victim of Russia’s geopolitical ambitions, commitments within the CIS have had the character of soft rules rather than hard, enforceable obligations (for specific research on this, I recommend my frequent co-author Rilka Dragneva’s very informative and well argued piece “Is “Soft” Beautiful? Another Perspective on Law, Institutions, and Integration in the CIS” in the Review of Central and Eastern European Law journal, 29, 3, 2004). If the CES operates in a similar way, it will be the ultimate example of a la carte free trade zone, which, at first glance, does not really make sense without rule clarity and predictability. The credibility of the common rules will be, in my view, crucial, if business interests are to take them seriously.

A last point worth considering is the fact that Putin’s Izvestya piece mentions the EU several times as an example worth following. Watching the Union’s current inability to deal with the eurozone crisis, one wonders whether the EU has lost some of its aura of a successful project that can be shown as an example of the benefits of regional integration. Apparently not. We would do well to keep this in mind. Imperfect as it is, the EU has survived also because its members have committed themselves in a credible way to common rules. and so far in Europe we have no better way to dealing with globalization than this proven set of rules and institutions…